Financial Mathematics
Intrinsic value refers to the actual value of an asset, based on its fundamental characteristics and potential to generate future cash flows, rather than its market price. In the context of financial derivatives, particularly options, intrinsic value is the difference between the current price of the underlying asset and the strike price of the option. This concept is vital for understanding how options are priced and helps investors make informed decisions about buying, selling, or holding these financial instruments.
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